In the Matter of Sigma Services Pty Ltd Batoka Pty Ltd v Sigma Services Pty Ltd
[1996] FCA 755
•28 AUGUST 1996
CATCHWORDS
PRACTICE AND PROCEDURE - application to have a subpoena set aside on the grounds that parts of the subpoena are too wide and because it is directed to irrelevant material - substantive application relates to s 205(12) of the Corporations Law - recipient of subpoena is not a party to proceedings and should not be required to make fine judgments as to interpretation of court orders - wording of subpoena too uncertain and excessively wide - request for documents premature as issue not yet joined by parties - general principles discussed.
Corporations Law (Cth) - ss 205(12), 205(10)(a)
In the Matter of SIGMA SERVICES PTY LIMITED
ACN 004 546 687
BATOKA PTY LIMITED (ACN 002 904 930) v
SIGMA SERVICES PTY LIMITED (ACN 004 546 687)
No NG3402 of 1996
Tamberlin J
Sydney
28 August 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3402 of 1996
GENERAL DIVISION )
In the Matter of
SIGMA SERVICES PTY LIMITED
ACN 004 546 687
BETWEEN: BATOKA PTY LIMITED
ACN 002 904 930
Applicant
AND: SIGMA SERVICES PTY LIMITED
ACN 004 546 687
Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 28 AUGUST 1996
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The subpoena be set aside.
The applicant pay the costs of Sigma (W.A.) Limited.
The applicant file and serve points of claim setting out with detailed particulars the matters and grounds on which it is alleged that the Court ought not to approve the giving of financial assistance, by 10 September 1996.
The respondent file and serve detailed points of defence by 20 September 1996.
The matter be relisted for further directions on Friday 18 October 1996.
NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No.NG 3402 of 1996
GENERAL DIVISION )
In the Matter of
SIGMA SERVICES PTY LIMITED
ACN 004 546 687
BETWEEN: BATOKA PTY LIMITED
ACN 002 904 930
Applicant
AND: SIGMA SERVICES PTY LIMITED
ACN 004 546 687
Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 28 AUGUST 1996
REASONS FOR JUDGMENT
TAMBERLIN J:
The recipient of a subpoena in this proceeding, Sigma (W.A.) Limited ("Sigma WA") has applied to the Court to set aside a subpoena issued by the applicant, Batoka Pty Limited ("Batoka") on the ground that certain parts of the subpoena are too wide and also because the subpoena is directed to material which is irrelevant to any issue between the parties to the application.
The application, filed on 20 June 1996, is made under s205(12) of the Corporations Law ("the Law") for an order disapproving the giving of financial assistance by the respondent ("Sigma Services") in connection with the proposed subscription for up to 23 million shares in the capital of the respondent by Sigma Pharmaceuticals Pty Limited ("Sigma Pharmaceuticals").
Section 205(12) provides that an application may be made to the Court opposing the giving of financial assistance where a special resolution has been passed approving such acquisition under s205(10)(a).
The factual background is complex and it is not necessary for the purpose of this application that it be set out in detail. The particulars of the proposed financial assistance as formulated by the respondents are set out in a Notice of Extraordinary General Meeting of Sigma Services as follows:
"A. Particulars of the Proposed Financial Assistance
The Company made a takeover offer dated 29 August 1995 for all the issued fully paid ordinary shares in QDL Limited (ACN 009 658 191) (QDL). The price paid for each share (of par value $1.00 each) was $2.20. The takeover offer closed at 5.00pm Melbourne time on 10 November 1995. The Company is now entitled to approximately 88.6% of the issued fully paid ordinary shares in QDL.
Under the terms of an agreement between the Company and Sigma Pharmaceuticals Pty Ltd (Sigma Pharmaceuticals) dated 10 August 1995, Sigma Pharmaceuticals agreed to make available to the Company by way of loan and capital subscription the funds required to pay the consideration for the acquisition of the shares in QDL under the takeover offer. During the period of the takeover offer, Sigma Pharmaceuticals advanced a total of $46,000,000 to the Company by way of loan in accordance with that agreement.
Sigma Pharmaceuticals obtained the funds advanced to the Company from Australia and New Zealand Banking Group Limited (ANZ) under a bill acceptance and discount facility provided by ANZ to Sigma Company Limited. The facility was provided for the sole purpose of funding the consideration payable under the takeover offer. The Company granted to ANZ a scrip lien over the shares on QLD held by the Company as security for advances made to Sigma Pharmaceuticals under the facility.
The financial assistance is that when the debt owed by the Company to Sigma Pharmaceuticals is converted to equity by the issue to Sigma Pharmaceuticals of the shares referred to in the resolution above (the Shares), the Company will have given financial assistance (within the meaning of s205(1) of the Corporations Law) by virtue of the fact that it has granted a scrip lien to ANZ as security for advances made to Sigma Pharmaceuticals under the bill acceptance and discount facility." (Emphasis added)
The Notice convenes a meeting in Victoria on 29 April 1995 to consider a resolution in the following terms:
"The Company provide financial assistance for the purpose of or in connection with the proposed subscription for up to 23,000,000 shares in the capital of the Company by Sigma Pharmaceuticals Pty Ltd, which shares shall have par value of $2.00 each and shall be issued at par and on terms and conditions which shall be determined by the Company from time to time."
All directors of Sigma Services resolved that the giving of the financial assistance would not be likely to prejudice the interests of the creditors or members of the company or any class of its creditors or members.
The resolution was passed at a meeting of Sigma Services on 29 April 1996 and a notice of the resolution was published as required under the Law on 30 May 1996. Within 21 days the application was made to the Court to oppose the grant of financial assistance.
Terms of the Subpoena
The Schedule to the subpoena dated 24 July 1996, issued by Batoka on Sigma WA reads as follows:
"1.Annual reports to members of Sigma (W.A.) Limited for financial years ended 31 January 1995 and 31 January 1996.
All documents in the possession, custody or power of Sigma (W.A.) Limited relating to the contingent liabilities of $55,336,172 shown in note 20 to the financial accounts of Sigma (W.A.) Limited for the financial year ended 31 January 1996, including (without limiting the generality of the foregoing):-
(a)all guarantees to bankers in respect of bank overdrafts and other bank advances to the "chief entity" and "related entity" secured by a cross deed of covenant with the "chief entity", as referred to in note 20 to the financial accounts of Sigma (W.A.) Limited for the financial year ended 31 January 1996;
(b)the cross deed of covenant with the "chief entity", as referred to in note 20 to the financial accounts of Sigma (W.A.) Limited for the financial year ended 31 January 1996; and
(c)all minutes of meetings of Directors of Sigma (W.A.) Limited held since 31 January 1995 relating to one or more of the matters referred to in paragraphs (a) and (b) above, inclusive.
All documents in the possession, custody or power of Sigma (W.A.) Limited relating to the giving of financial assistance by Sigma Services Pty. Limited for the purpose of or in connection with the proposed subscription for up to 23,000,000 shares in the capital of Sigma Service Pty. Limited by Sigma Pharmaceuticals Pty limited.
All documents provided to the directors of Sigma Services Pty. Limited between 31 January 1995 and 29 April 1996 relating to the financial position of Sigma (W.A.) Limited."
Breadth
The respondent submits that the subpoena on its face is too wide. No objection is taken as to paragraph 1 on this basis.
To appreciate the reach of paragraph 2 it is necessary to consider the terms of the reference to Note 20 to the accounts of Sigma WA. That Note relevantly reads:
"20 CONTINGENT LIABILITIES 31 January 31 January
1996 1995
$ $
....
Guarantees to Bankers in respect
of bank overdrafts and other bank
advances to the chief entity and
related entity secured by a cross
deed of covenant with the chief
entity.
55,336,172 4,503,279
...."
The authorities are to the effect that a reference to documents relating to a specified matter is not of itself sufficient to justify the setting aside of a subpoena. However use of those words may, in particular instances, indicate that a subpoena is too wide. In the present case, Sigma WA although in the same group of companies as the respondent is not a party to the proceedings.
The underlying principle is that a non-party should not be compelled to make fine judgments as to the interpretation of court orders or as to whether documents "relate" in any way to issues in the proceeding. In the present case, it seems to me that the preamble to paragraph 2 is cast too widely. It refers to all documents in the "custody or power" of the recipient. It calls for a judgment as to whether each document "relates" to the contingent liabilities under consideration. However, the specific paragraphs 2(a), (b) and (c), are not in my view excessively broad. They refer to specific documents which are capable of being readily selected and identified.
Paragraph 3, in my view, is too wide. It calls for a judgment as to whether the document relates to the giving of "financial assistance" for the purpose of or in connection with a proposed subscription for 23 million shares. There is no definition as to the nature of such "financial assistance". Further, judgment is called for in deciding whether any such "financial assistance" is for the purpose of or in connection with a subscription for shares in the capital of Sigma Services. This uncertain and generalised wording, in my view, requires a non-party to make an assessment on an unspecified basis as to (i) whether documents are "related" to the giving of assistance; (ii) what is the precise financial assistance; (iii) what is the purpose of the financial assistance and (iv) whether the documents are in connection with the subscription or shares. I therefore consider this paragraph should be set aside in its entirety as presently cast.
As to paragraph 4, I think this is too wide. It refers to the "financial position" of Sigma WA". This expression encompasses an excessively wide range of matters and could embrace documents ranging from accounting statements to receipts, title deeds, notes or other records. The qualification that the documents in question are those which have been provided to the directors of Sigma Services is not, on its face, sufficient to cure this defect. This would call for an extensive examination of documents furnished to Sigma Services by any employee or officer of the company.
In addition, it seems to me that the request is premature. As I understand the position at present, complete discovery has not been given by Sigma Services with respect to documents within its control or power which are relevant to the proceedings. Accordingly, I think the preferable course is for full discovery to be obtained from Sigma Services and if this proves to be inadequate or if there are indications that other relevant documents exist, then a subpoena in specific terms could be directed to Sigma WA. The financial position of Sigma WA may well be complex and detailed, and I think there should be greater specification as to precisely what documents are being sought.
Therefore, on the basis of the excessively wide language used in the subpoena, I set aside the preamble to clause 2 and the whole of paragraphs 3 and 4 as presently framed.
Relevance.
In this matter there have been no pleadings or points of claim to distil the real issues between the parties which will be agitated at a hearing.
I think this needs to be done and I will give some directions in relation to it.
It seems to me that the parties have not joined issue as to what is said to be the precise nature of the financial "assistance". The respondent adopts the stance that the financial assistance has not yet been granted. It is submitted for the respondent that the financial assistance could only be the conversion of the debt to Sigma Pharmaceutical into equity. The applicant takes the position that the financial assistance provided is the provision of a scrip lien which occurred on 26 October 1995 without the procedure set out in s205(10) of the Law having been followed.
The reason for which I advert to the above considerations is that in the absence of issue having been joined by the parties as to precisely what is in dispute, it is not possible to identify whether any particular document or group of documents referred to in the subpoena is within the ambit of being considered reasonably relevant to the issues. I cannot therefore be satisfied that the documents sought to be produced from Sigma WA are relevant to the issues in dispute. This is a second and independent ground on the basis of which I set aside the subpoena as a whole.
On the hearing of the application to set aside the subpoena a number of issues were raised as to standing, the proper construction of s205(13) and as to what amounts to financial assistance. It is neither necessary nor appropriate in this application to set aside a subpoena, cast in terms which have been found to be too wide, for the Court to embark upon a consideration of these questions which go to final relief. If they are to be canvassed at all then it is appropriate that such matters be dealt with after consideration of full argument on the issues. It is by no means self-evident that the questions raised in argument can be decided only one way.
Future Course
I grant the motion to set aside the subpoena with costs.
I direct that by 10 September 1996 the applicant file and serve points of claim setting out with detailed particulars the matters and grounds on which it is alleged that the Court ought not to approve the giving of financial assistance. These points of claim should clearly and specifically identify the financial assistance which is under challenge and the basis on which the Court is asked to exercise its discretion under s205(13). Detailed points of defence should be filed and served by 20 September 1996 and the matter can be brought back before the Court on 18 October 1996 before me for further directions as to the future conduct of the matter.
On that occasion I would expect the parties so far as possible to have agreed on a timetable to get the matter ready for hearing.
I certify that this and
the preceding ten (10)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 28 August 1996
Solicitor for Applicant: Mr Blanks of
Stephen Blanks & Associates
Counsel for Respondent: Mr D Hayes QC
Solicitor for Respondent: Arthur Robinson & Hedderwicks
Date of Hearing: 16 August 1996
Date Judgment Delivered: 28 August 1966
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